Food Delivery Hits The Web, But Restaurants Pay The Price

A Seamless sticker is displayed next to the menu in the window of a restaurant in New York's Times Square on Saturday. Rivals Seamless and GrubHub said Friday that they have completed their combination, creating an online takeout company covering about 25,000 restaurants in 500 cities.

Mary Altaffer
/ AP

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Originally published on August 12, 2013 8:56 am

Two big restaurant delivery websites — Grubhub and Seamless — have announced a merger. Together, they'll allow diners in 500 cities the convenience of ordering from thousands of restaurants with just a few clicks on their computer. For restaurants, the costs of being on these websites can be hard to swallow.

If you're a takeout or delivery customer, websites like Seamless and Grubhub are a marvel. No more shouting into the telephone receiver, hoping to make yourself understood to someone in a noisy kitchen.

Just type and click your order. It's a big improvement.

But if you're a restaurant, this shift to the web may not sit so well with you.

"The more business we bring Seamless, the more commission they charge us," says Pedro Munoz, who owns Luz, a Latin-American restaurant in Brooklyn.

Two years ago, Munoz signed up with Seamless. The commission seemed high — they'd take $1 out of every $10 order — but he was willing to give it a try. And at first, Munoz really liked the results.

"Almost [instantly] the business started picking up," he says. "We had to hire another delivery guy."

But then little things started bugging Munoz. There was a $150 a month "marketing fee" that he couldn't understand, and Seamless only paid him every 30 days, which left him chronically short of cash.

When his monthly orders increased to over $10,000, Seamless raised its take from 10 percent to 14 percent. Munoz couldn't believe this. When he orders more from his vegetable supplier, the price goes down. With Seamless, the opposite was happening.

"I asked them, 'I'm bringing in three times as much money to Seamless as before. Can we negotiate the fees?'" he says. "They said they could drop me any day, and they don't negotiate fees."

Matt Maloney, CEO of the newly merged Grubhub-Seamless, says the relationship isn't adversarial, it's supportive. He says that they don't make money unless the restaurant makes money, but Seamless provides a valuable service that restaurants can't easily match.

"If a restaurant's not on Grubhub-Seamless, then their best option is to distribute paper menus around their neighborhood," Maloney says.

A lot of restaurant owners agree that is ineffective. Tom DeSimone owns the tiny RBBTS Café in Manhattan. He says the food delivery website connects his restaurant to law firms and banks. Big companies that use vouchers for websites like Seamless to reward their employees.

"It got us to the 100th floor of some building that you would never slip your menu underneath, and I just feel it opened us up to more of an online community," DeSimone says.

The commission might be high, he says, but that even if Seamless increased its cut, he would still stick with them.

Two big restaurant delivery websites - GrubHub and Seamless - have announced a merger. Together, they will allow diners in hundreds of cities the convenience of ordering from thousands of restaurants with just a few clicks or taps of a screen.

But Ilya Marritz, of member station WNYC in New York reports, for some restaurants the cost of being on these websites are you sure it can be hard to swallow.

ILYA MARRITZ, BYLINE: If you're a takeout or delivery customer, websites like Seamless and GrubHub are a marvel. No more shouting into the telephone receiver, hoping to make yourself understood to someone in a noisy kitchen. Just type and click your order. Big improvement.

But if you're a restaurant, this shift to the web may not sit so well with you.

PEDRO MUNOZ: The more business we bring Seamless, the more commissions they charge us.

MARRITZ: Pedro Munoz owns Luz, a Latin American Restaurant in Brooklyn. Two years ago, he signed up with Seamless. The commission seemed high - they'd take one buck out of every $10 order - but he was willing to give it a try. And at first, Munoz liked the results. Really liked them.

MUNOZ: Almost instant, I should say, the business started picking up. We had to hire another delivery guy. So yeah...

MARRITZ: But then, little things started bugging Munoz. There was a $150 a month marketing fee, which he couldn't understand. And Seamless only paid him every 30 days, which left him chronically short of cash.

When his monthly orders increased to over $10,000, Seamless raised its take from 10 percent to 14 percent. Munoz couldn't believe this. When he orders more from his vegetable supplier, the price goes down. With Seamless, the opposite was happening.

MUNOZ: I asked them, you know, I'm bringing in three times as much money to Seamless as before. You know, can we negotiate the fees? And they said that they could drop me any day, and that they don't negotiate fees.

MATT MALONEY: We don't make money unless the restaurant makes money.

MARRITZ: This is Matt Maloney, CEO of the newly merged GrubHub Seamless. He says the relationship isn't adversarial, it's supportive. Seamless provides a valuable service restaurants can't easily match on their own.

MALONEY: If a restaurant's not on GrubHub Seamless, their best option is to distribute paper menus around their neighborhood.